In divvying up assets in bankruptcies, Hong Kong liquidators need sensitive touch
Friday, 09 January, 2015, 8:43am
Many people just can’t balance their income and expenses – liquidator Mat Ng
What’s common between fallen chief secretary Rafael Hui Si-yan, convicted inside trader Du Jun and US hedge fund Tiger Asia?
Mat Ng. The Managing director of JLA Asia, he is the liquidator currently handling Hui’s bankruptcy, selling his music record collection and other assets to repay his creditors. Ng has also worked for the Securities and Futures Commission to handle Du and Tiger Asia to compensate the investors who suffered as a result of their insider dealings.
Born in Shanghai, Ng moved to Hong Kong as a child. He grew up here before moving to Australia to attend high school and university and get a degree in accountancy. But rather than opting for mainstream accounting jobs, he focused on insolvency and liquidation.After graduation, he returned to Hong Kong to join the Official Receiver in 1992 to handle personal and corporate bankruptcy cases. He left the government job to join the private sector in 1996 and has worked with several companies focused on liquidation and insolvency before joining the current firm in 2007.
In an interview to the South China Morning Post , Ng talks about what as a liquidator.
What exactly is a liquidator’s job?
When a company winds up or an individual goes bankrupt, we arrange the sales of the assets of the company or the individual and distribute the proceeds to creditors. We also uncover hidden assets.
Sometimes a company may have serious debt problems but hasn’t reached the stage when it needs to be wound up. We help such companies to restructure their debt and, like doctors, help to restore health.
Recently, the Securities and Futures Commission has assigned us a new task. The regulator has lately been seeking court orders under Section 213 of the Securities and Futures Ordinance to demand errant companies compensate investors hurt by their behaviour. The SFC has appointed us to handle such refunds.
What are the most common reasons for personal and corporate bankruptcy?
For personal bankruptcy, it’s spending habit. Many people just can’t balance their income and expenses.
For companies, the most common reason is cash flow. When major clients delay or default on payment, a firm may, in turn, fail to repay its bank loans.
In handling liquidation, what assets do you take?
The law allows a liquidator to take almost all assets from an individual or a company, but we make sure the individual has sufficient money to maintain a reasonable standard of living. The assets can range from property and jewellery to watches and furniture. Rafael Hui is a special case as he had a huge collection of 11,000 vinyls music records. It’s now up for sale. We have received expressions of interest from over 100 buyers.
The law bars us to seize certain assets. Individual life insurance policies where the beneficiaries are the spouse or children are excluded. If a bankrupt person is living in his or her own flat, we are required to allow them to stay on for six months before selling the property.
One major item the liquidators can’t sell is the ‘tool of trade’ – the equipment that one relies on to make a living. In the old days, that could have been a plough for a farmer or the screwdriver for a repairman. But things have got more complicated nowadays and often we have to make the call on what constitutes ‘tool of trade’.
As an example, a taxi driver was declared bankrupt. He owned his taxi but then that was also his tool of trade. In a situation like that, we would need to discuss if he can sell the taxi to repay a part of his debt and we allowed him to rent another taxi to continue to earn his livelihood.
Is it true that there’s a rule that a person declared bankrupt can’t take cabs?
It’s a myth. We work with the person declaring bankruptcy to reach an agreement on a reasonable monthly expense. If the person needs cab rides for his job or for urgent matters, he certainly can. As long as he does not cross the agreed monthly expense, it’s up to him to decide if he needs a taxi or not.
Sometimes we can’t reach an agreement and need the court to make a decision. There was once a case in which a working lady who declared herself bankrupt wanted to keep a domestic helper. The Official Receiver opposed it but she said it was necessary for her if she were to keep working. The court supported her.
Then there was this bankrupt person who wanted to keep money to donate to Church but as a liquidator, I did not see it as a legitimate expense as it was not deemed fair to the creditors. After negotiations, he agreed with my assessment.
If someone has many creditors but only a few assets, how do you divvy up the assets?
There is an order of distribution, according to the bankruptcy law. The first would be the government payment related to the bankruptcy or winding-up orders. It is followed by the liquidators’ fee. Then comes employees’ salary. Next on the list are bank loans and suppliers’ outstanding payments. The shareholders are the last on the list and usually do not get anything.
Many companies or individuals have assets overseas or on the mainland, can you trace them back?
We can trace back overseas assets even though it is more difficult than tracking it down in Hong Kong. We have just completed a case in which a couple that went bankrupt had assets in the US. We spent 16 months on the case before the US Bankruptcy Court issued an order recognising the Hong Kong liquidation proceedings, and for us to get the assets from the US banks for distribution among Hong Kong creditors.
For the mainland, the challenges are the local governments and the local courts, which tend to protect the interests of the locals. It takes a long time for us to convince the local courts to agree to allow us access to the assets there.
What are the major challenges in this line of work?
I would say balancing the interests of all parties. When a person or a company goes bust, the debtors, the employees, suppliers, banks and all other creditors want to get their money back. We have to communicate with them well and achieve a settlement that everyone agrees to.
Contacting mainland investors as part of the SFC refund in the Du Jun and Tiger Asia cases have been challenging. We contacted some mainlanders by phone and told them they will get the money back from their trades years ago. They all hung up the phone thinking it a hoax call. We had to try to explain to them the details. Both cases are now almost complete and more than 96 per cent of the investors have been refunded.
Who are suitable to be liquidators?
There’s no specific qualification but many liquidators are trained as accountants as liquidation involves books and numbers. We also need to have an investigative instinct. Most importantly, we need good communication skills and high emotional intelligence to handle employees and creditors. They are usually not a happy lot and we have to assure them that we are there to help.
What’s the most interesting case you have ever handled?
Aberdeen’s Albert House case is a memorable one. A canopy collapsed and killed a passer-by and injured 12 in 1994. The court ruled in 2001 that the owners of the apartments of the building needed to pay a combined HK$33 million.
Many owners were old people who worried the liquidators would force them out and sell their flats to raise the money. They were very hostile when I first met them. After many rounds of negotiations, we arranged a special government financial arrangement to help them pay the compensation that would allow the aged owners to stay on until they died.
The owners were very happy and even gave me a prize as their token of gratitude. This is why I like my job. You can help people retain jobs, secure creditors their money, and in a case like that, help the victims as well as the old to keep their flats.
Liquidator runs after mistress of bankrupt former HK chief secretary
Friday, 09 January, 2015, 8:53am
“I have the duty to chase all assets of Mr. Hui to return to his creditors”
The liquidator who handled the bankruptcy of jailed former Chief Secretary Rafael Hui Si-yan plans to meet his Shanghai mistress to chase some or all the HK$7.5 million gift he gave her, the South China Morning Post has learned.
Mat Ng, managing director of JLA-Asia, the liquidiator who was appointed as trustee to handle Hui’s case after his bankruptcy in November 2013, plans to meet his mistress Eline Shen to negotiate a settlement.
“As the trustee to handle the bankruptcy, I have the duty to chase all assets of Mr. Hui to return to his creditors,” said Ng, a veteran liquidator who handled many high profile liquidation and personal bankrupty cases over the past two decades.
Ng told the Post in an exclusive interview that under local law, the liquidator can trace any gifts or cash offered five years by someone who declared bankruptcy.
“The liquidator can trace these assets even if they are in the mainland. It may take a longer time to handle cross border cases but it is not a mission impossible,” he said.
He said besides taking back the gifts, it is also possible to reach an agreement with the mistress for her to keep the flat but then she has to pay a reasonable settlement amount.
“It is all negotiable and we hope we can reach an agreement,” Ng said.
Hui, 66, is now serving 7-1/2 years in prison sentence for accepting a bribe from former Sun Hung Kai Properties co-chairman Thomas Kwok Ping-kwong and former director Thomas Chan Kui-yuen. Both Kwok and Chan were also convicted.
The conviction and jail term of Hui would not affect the liquidator’s job, Ng said, adding he would continue to track assets of Hui and sell them to be returned to creditors.
Hui is believed to owe more than HK$75 million from at least five banks and was declared bankrupt by the Hong Kong court in November 2013.
The disgraced former No.2 official of the city confessed in court during the trial in October that he had spent HK$7.5 million on a young Shanghai woman with whom he started an “intimate” relationship in 2008. He gave her cash, properties, car, investment, handbags, watches and other presents.
The mistress, Eline Shen, a 34-year old former Dragonair flight attendant, told Chinese magazine East Week that she used the sum to buy a flat and an Audi in Shanghai. She met Hui at a dinner several years ago and secretly dated him for nearly three years until Hui stopped calling her after they last met in September 2011.
The assets of Hui’s wife under her own name would not be affected, Ng said. “The wife has no burden to shoulder the debt of the husband,” he said.
As a special type of assets, Ng is now handling sales of Hui’s entire music library, the fruit of a collection craze he started since the 1960s.
Hui, a music fan, has a collection of 10,955 discs – mainly vinyl LPs and Classical music but also some rock and pop discs, including prized Beatles albums from the 1960s.
The hobby cost him millions of dollars. During the trial, he admitted spending HK$200,000 in a single day buying albums, and going on overseas trips for opera concerts that cost more than HK$200,000.
“We have received over 100 bidders. Some want to buy the whole lot while some wants specific titles of the album. I believe we could find a single collector to buy the whole lot and the deal would be completed soon,” he said.
Hui also had owned several races horses and a HK$7 million wine collections. Hui sold the horse after being investigated by the Independent Commission Against Corruption (ICAC) in 2011 while the wines were sold by the creditor before his bankruptcy.